Clustering to Compete

[dropcap]C[/dropcap]ompete Caribbean looks to leverage link between collaboration and innovation.

Innovation, a key driver of growth, has long posed a challenge for the Caribbean economy. Vital to all aspects of the region’s finances, from trade to tourism, the ability to innovate is crucial in a competitive global market but budding Caribbean entrepreneurs are often beset with obstacles. Limited access to capital, inadequate resources and a lack of institutional support are just some of the issues the region’s innovators must overcome.

Compete Caribbean, jointly funded by the Inter-American Development Bank (IDB), the UK Department for International Development and the Caribbean Development Bank, is working to address this through its own innovative scheme – the cluster development programme which grants up to US$400,000 to private sector firms collaborating to grow their market. Since its first call for proposals in 2012, the initiative has gained ground in the region, supporting eight clusters and impacting 525 firms. Now Compete Caribbean is looking to build on that growth, particularly in Eastern Caribbean countries such as Saint Lucia where, it says, interest is low and need is great.

“The Eastern Caribbean is particularly suited to this type of support because most of the businesses there are very small [but] Grenada has been the only country from the Eastern Caribbean to get a cluster grant,” says Compete Caribbean’s Executive Director Dr Sylvia Dohnert who suggests that the IDB’s limited presence in the area may be to blame, as well as a general lack of awareness about the project. “This is a programme executed by the IDB and they are active in the Eastern Caribbean but have no country offices there. During the first phase there may have been less knowledge about what we were doing.”

Growing the pie

What Compete Caribbean is doing is encouraging businesses to work together in a way that will eventually benefit the entire region. The organisation defines cluster development as businesses in the same sector, or supply chain, working together to export their products. This has many benefits for the participating firms including shared costs, the ability to build a brand together, collaborate on marketing and jointly invest in quality standards testing.

“There are a number of opportunities in clusters,” says Brian Louisy, Executive Director of the Saint Lucia Chamber of Commerce, Industry and Agriculture. “They can build skill where there is none,

provide an opportunity to bring firms together and build industry cooperation. They give you the opportunity to have a different type of conversation, one where everyone gets a better understanding of each other’s needs.”

In July 2017 Compete Caribbean co-hosted a forum in Saint Lucia with the country’s National Competitiveness and Productivity Council to discuss ways of stimulating private sector development. Louisy says that, although the issue is complex, these type of discussions are important and initiatives such as the cluster development programme are something Saint Lucia’s private sector is exploring. “Programmes like this can be of tremendous value. With the right resources and the right leadership you can use clusters in a wide range of sectors. It is not something that is unique or specific to any one industry. It is a way of thinking, developing and bringing people together to find areas of commonality so you get economies of scale and value chains being built up.

“There are opportunities in clusters but it does not just happen, you have to make it happen. It requires you to examine very closely what you are doing.”

One of Compete’s first, and most profitable projects, was that of the Belize Shrimp Growers Association who were granted funding in 2012 to obtain Aquaculture Stewardship Council (ASC) certification and increase their export market base. All ten of Belize’s shrimp firms came onboard and now it is the only country in the world where all firms have the coveted ASC standard – giving them the opportunity to create a Belizean brand.

It is success stories like this that help Compete Caribbean overcome some reticence within the private sector, according to Dr Dohnert who says, “The difficulty in a cluster project is that businesses may feel they are competing and not collaborating. The most successful projects are those that show where firms can collaborate and make the pie bigger, rather than being of the mindset that this person is going to get a bigger slice.

“The idea is to discover how you make the pie bigger for everyone.”

 Compete’s current call for cluster proposals closes at the end of October. To be successful, applicants must demonstrate the potential to generate employment, with particular consideration given to those who can stimulate job creation among vulnerable groups or women. A cluster consists of a minimum of three firms. Once the winning bid is chosen, Compete will link that group with a professional consultant and provide 80 per cent of the project’s total budget (to a maximum of US$400,000) with the private sector participants contributing the remaining 20 per cent.

Diversity in the mix

Clustering feeds into Compete’s central aim – innovation. “Just the fact that the firms are working together opens the opportunity for innovation because there is now diversity in the mix,” says Dr Dohnert. “They are using new processes, new technology, new products.

“Productivity in the Caribbean at the country level has stagnated over the past two to three decades. One really impactful way to drive productivity is innovation.”

Dr Dohnert believes that offering clusters funding is the best way to ensure innovative ideas make it to market, adding, “The main barrier for the private sector is access to finance. Commercial banks are not the ideal means to fund innovation because it is a risky process. There are a lot of firms with very interesting ideas but their capacity to implement is cut short by lack of funding.”

Small and Medium-sized Enterprises (SMEs) are most vulnerable to the dampening effect of insufficient capital, which spells trouble for the region given that they are often the economy’s innovators. More than 75 per cent of the Saint Lucia Chamber of Commerce members are SMEs, and all operate in a challenging environment.

“There are a whole range of issues confronting them,” says Louisy. “There are few SME-specific financial products available which meet their needs; they often cannot find the right skill set or recruit those skills to make their businesses competitive. There are many challenges, depending on the sector, and SMEs contribute so much – providing employment, ensuring social stability – you name it, they do it. They are the essence of our economy.”

Coming together for cluster grants can afford SMEs some protection against the vagaries of the market – which is good news for the Caribbean’s overall economic health, according to Dr Dohnert.

“SMEs generate a large number of jobs in the Caribbean. In every developed country in the world we see a large role for SMEs in generating economic development. They are more nimble, more innovative and therefore sometimes have an advantage over larger firms.”

Fulfilling potential

First conceived in 2009, Compete Caribbean is now entering its second strategic phase. Its first phase, which generated 12,000 jobs in the region and helped private sector firms increase their revenues by 43 per cent and exports by 21 per cent, will be a tough act to follow but Dr Dohnert says her team is ready for the challenge.

She is pleased and proud of the progress so far and wants to build on this solid foundation by continuing to deliver on the organisation’s core mandate. “In our second phase we want to support sustainability of the kind of efforts we have been pushing in the region. That entails encouraging innovation and working more closely with institutions that support the private sector.

“It is important to me that we continue to have success. I’m personally committed to this, I love the Caribbean, it is a fantastic region. Projects like the cluster programme are important so we can provide people with much better futures. The Caribbean has so much potential.”